Analyst Says Pharma Co. Has No True Competitor
Research Report

Verona Pharma Plc. (VRNA:NASDAQ; VRP:LON) is gearing up for a potential FDA approval of its twice-daily ensifentrine, a novel PDE3/4 inhibitor for the treatment of chronic obstructive pulmonary disease (COPD) Jefferies & Co. analyst Andrew Tsai wrote in an April 19 research note. Tsai said he remains highly confident (90%+) that the FDA will give the green light by the June 26 PDUFA date.

"We think VRNA stock is poised to break out of its consolidation pattern in H2:24, driven by a likely FDA approval in June 2024 and a subsequent strong launch trajectory thereafter," Tsai stated in a recent research note.

The analyst highlighted that ensifentrine's unique mechanism of action, robust efficacy (35-45% placebo-adjusted exacerbation benefits), and clean safety profile make it an attractive add-on therapy to all approved COPD drugs. Tsai believes that ensifentrine could expand the US$10B+ branded market rather than simply taking market share.

"We'd argue there are also no true competitors," Tsai added, noting that later-stage COPD drugs in development by GSK, REGN, AZN, and AMGN are all biologics (injectables). In contrast, ensifentrine offers several advantages, including broader applicability, no requirement for eosinophil testing, improvements in lung function, likely lower cost, and potential benefits from adjacent COPD awareness.

Tsai also pointed out that the recent developments in the COPD space, such as the upcoming FDA decision on Regeneron's Dupixent (June 27) and Amgen's Tezspire moving into Phase III trials, could help raise awareness of ensifentrine.

"Although Dupi (IL-4/IL-13) is another novel option, it is inherently an injectable, applicable to a narrower COPD population (30-34% pbo-adj exacerbation benefit in refractory patients with high EoS counts ≥300), and does not provide acute relief - yet its parallel marketing efforts could help drive the adoption of Ensi," Tsai explained.

The analyst's survey of 18 pulmonologists, who cumulatively treat more than 7,000 patients, suggests that ensifentrine's launch trajectory should be favorable in 2024-25. 

"Our doctors consistently highlight Ensi's efficacy benefit as an add-on, relative convenience, and clean safety," Tsai noted. The survey also revealed that, at peak, the doctors see themselves prescribing ensifentrine to 20-25% of their uncontrolled COPD patients, primarily those on triple therapies and secondarily those on dual therapies.

Tsai wrote the he maintained a Buy rating on Verona Pharma with a price target of US$38, representing a significant potential upside from the current price of US$16.10. Tsai's US$1B sales estimate for ensifentrine is based on a conservative assumption of less than 5% penetration within the subset of COPD triple patients, or effectively a 1% overall market share.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Verona Pharma Plc.
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Disclosures for Jefferies Equity Research, Verona Pharma, April 19, 2024

Analyst Certification: I, Andrew Tsai, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. I, AJ Velasquez-Mao, Ph.D., certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgement.

Investment Recommendation Record (Article 3(1)e and Article 7 of MAR) Recommendation Published April 19, 2024 , 05:41 ET. Recommendation Distributed April 19, 2024 , 06:30 ET.

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